The Court of Appeal has held that a foreign company which does not carry on business within England and Wales cannot be validly served by leaving a claim form with a director who is within the jurisdiction: SSL International Plc and another v TTK LIG Limited and others [2011] EWCA Civ 1170. That was the position before the introduction of the Civil Procedure Rules (CPR), as held in The Theodohos [1977] 2 Lloyd’s Rep 428. The present decision confirms that the same applies under the CPR.

The court also found that the holding of occasional board meetings in England, and the approval of expenditure abroad by e-mail from England, does not amount to carrying on business within the jurisdiction.

Background

The first defendant (TTK) was an Indian joint venture company in which a subsidiary of the first claimant English company and the defendant Indian individuals were fifty-fifty shareholders. The joint venture agreement provided that the joint venture was governed by Indian law.

Under the terms of the joint venture, each side had the right to appoint four nominee directors to the board of TTK. However, following the resignation of two directors nominated by the claimants, replacements were voted in from the defendants’ camp. Following this change of control, TTK demanded new terms under its supply contracts with the claimants and, to strengthen its bargaining position, ceased to supply products to the claimants.

The claimants issued proceedings seeking injunctions requiring TTK to recommence supplies as well as damages for breach of contract and economic torts (in particular procuring a breach of contract and conspiracy).

Purported service

The claimants purported to serve the claim form on TTK pursuant to CPR 6.5(3), which allows a claim form to be served personally on a company or other corporation by leaving it with a person holding a senior position. In fact the claimants left the claim form with one of the remaining TTK directors nominated by the claimants, at their own offices in England. TTK did not respond to the claim and the claimants issued an application for judgment in default.

Need to carry on business within the jurisdiction

The Court of Appeal held that service had not been effective on TTK. Before the introduction of the CPR, a foreign company could be served within the jurisdiction under the common law only if it had a place of business within the jurisdiction: The Theodohos. There was no good reason to consider that this principle, which represented “a fundamental rule of the common law”, had been excluded from the equivalent provision in the CPR. If the principle did not apply, a foreign company could be personally served within the jurisdiction if a director was passing through on holiday. That could not have been intended.

The court commented that if a claim had a real connection with the jurisdiction, permission to serve out could be sought and would be granted. There was no need for CPR 6.5(3) to apply to foreign companies which had no presence within the jurisdiction, and the claimants had not been able to point to any reported case in which it had been applied in this way.

This contrasts with service on foreign individuals, who can be served personally on the basis of their temporary presence within the jurisdiction. As the court put it, if an individual is here, he is here. In contrast, the temporary presence of a director of a foreign company does not mean the company is here.

What amounts to carrying on business within the jurisdiction?

The court applied the Court of Appeal decision in Adams v Cape Industries [1990] Ch 433 which set out, by reference to previous caselaw, three requirements in order to establish that a company carries on business within the jursidiction: the relevant acts must have continued for a sufficiently substantial period of time; they must have been done at some fixed place of business; and there must have been a person carrying on business for the company in this jurisdiction.

Applying this test, there was not even a good arguable case that TTK was carrying on business within the jurisdiction at the time it was purportedly served. The holding of occasional board meetings in this country could not satisfy the requirement, and in any event the joint venture had broken down before the claim form was served and there was no prospect of future board meetings here. The fact that approvals were given by email from London for expenditure to be incurred in India also did not amount to carrying on business here. The court commented that, if it did, most holding companies would be held to be carrying on business in every country in which they had established a subsidiary.

England not appropriate forum

The court also refused to grant interim injunctive relief or to permit service of the claim out of the jurisdiction, as England was not an appropriate forum for the litigation. The claims arose under contracts governed by Indian law, related to a company registered in India and events in India and were against individuals in India and so, the court said, should be litigated in India.